UBS hikes target for Morgan Advanced Materials but stays at neutral

To prove their point, they highlighted the company´s own guidance for R&D investment to increase by just 1% of sales over the next three to five years.

That, they said, suggested little change in the underlying performance of the bussiness over the medium-term.

Their forecasts called for organic sales to expand at a compound annual growth rate of 2.4% with margins at roughly 12% over 2016 to 2020, in comparison to the equivalent average for its sector peers of 3.5% and 15%, respectively.

Hence, although shares in the UK ceramic and carbon materials engineer were changing hands at about a 25% discount to the sector´s average EV/EBITDA multiple for 2017, in the case of Morgan that was justified, the broker said.

Nonetheless, the Swiss broker did revise its estimates for the company´s earnings per share in 2016 and 2017 higher by 1% and 6%, respectively, to account for recent foreign-exchange related tailwinds.

"We estimate that a 10% move in the $/£ rate equates to a 3% EBITA impact and a 10% move in the €/£ equates to a 4% impact, all else remaining equal."